UN-Water GLAAS TrackFin Initiative: Guidance Document (English)

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Tracking financing to

sanitation, hygiene and

drinking-water at the

national level

TrackFin

Initiative

GUIDANCE DOCUMENT

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UN-Water GLAAS TrackFin Initiative: tracking financing to sanitation, hygiene and drinking-water at national level

ISBN 978-92-4-151356-2

© World Health Organization 2017

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TrackFin initiative:

A brief overview

Effective financing for drinking-water, sanitation and hygiene (WASH) is essential for the sustainable delivery of services. The UN-Water Global Analysis and Assessment of Sanitation and Drinking-Water (GLAAS) indicates that there are substantial gaps in our understanding and tracking of financing to the WASH sector. Financial reporting is often insufficient to enable sound, evidence-based planning and budgeting decisions.

To help rectify these shortcomings, WHO is leading the TrackFin initiative under the UN-Water GLAAS project. Its objectives are to define and test a globally accepted methodology to track financing to WASH at the national level. This methodology enables countries to track sector financing using standardized classifications, and to develop a set of WASH accounts and indicators presented in a format comparable across regions and countries. Its aim is to answer four basic questions:

• What is the total expenditure in the sector?

• How are funds distributed between the various WASH services and expenditure types, such as capital expenditure, operating and maintenance expenditure, and cost of capital?

• Who pays for WASH services?

• Which entities are the main channels of WASH funding, and what is their respective share of total spending?

Expected benefits from this initiative include strengthening national systems for the collection and analysis of financial information for WASH sector policy-making and programming, and better understanding of how financial resources for WASH are allocated at both national and global levels. TrackFin is being developed in collaboration with leading country sector institutions, national statistical offices, finance departments, and international entities such as the UN Statistics Division, the OECD and the World Bank, and with support of a Technical Advisory Group comprising sector and finance experts.

Building on experience in the health sector, WHO has developed this Guidance Document for use by institutions involved in monitoring and financing the WASH sector at the national level. The approach was successfully applied during pilot testing in Brazil, Ghana and Morocco, and lessons learned have been incorporated into a revised methodology. TrackFin will now be implemented in other countries, and repeated in the initial set of countries in order to gradually build up a set of comparable data.

The TrackFin initiative is managed by a small secretariat hosted by WHO. Its purpose is to provide overall methodological guidance for the work at the international level, as well as training for countries interested in applying the methodology. In response to country requests, WHO can provide support to national stakeholders planning to prepare WASH accounts.

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Acknowledgements

This report has been prepared by Sophie Trémolet and Marie-Alix Prat of Trémolet Consulting Limited (London), under the leadership and guidance of Bruce Gordon, Didier Allély-Fermé and Fiona Gore, as well as Jacqueline Sims and Betsy Engebretson of WHO. This is the second version of the Guidance Document, incorporating comments received from the Technical Advisory Group (TAG) for the TrackFin initiative on the initial version, and from all participants at the interregional workshop held in Rabat, Morocco in September 2014.

We are very grateful for comments provided during early stages of the exercise and at the inter-regional workshop. We thank the local WASH accounts team that led the testing of the initial version of the Guidance Document, namely:

• In Brazil: Lauseani Santoni and Marta Litwinczik (Ministério das Cidades), João Batista Peixoto, Consultant, Brazil, with support from Teófilo Monteiro and Paulo Teixeira of PAHO/WHO;

• In Ghana: Fred Addae and Suzzy Abaidoo, Ministry of Water Resources, Works and Housing, Kweku Quansah, Ministry of Local Government and Rural Development, Harold Esseku, Consultant, Phillipa Ross, Consultant, UK, with support from Akosua Kwakye, WHO; and

• In Morocco: Samir Bensaid, Institut de l’Eau et l’Assainissement, Mokhtar Jaait, ONEE-Branche Eau, Morocco, Khalid Nadifi, Consultant, Morocco, with support from Hamed Bakir and Rola Aleman of WHO.

Together with national stakeholders in all three countries, they made an invaluable contribution to developing the first set of WASH accounts and providing feedback on the methodology.

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List of acronyms and abbreviations

3Ts Tariffs, Taxes and Transfers (sources of finance)

AICD Africa Infrastructure Country Diagnostic

AMCOW African Ministers’ Council on Water

CBO Community-based organization

CLTS Community-led Total Sanitation

COFOG Classification of the Functions of Government

CPC Central Product Classification

CRS Creditor Reporting System

CSO Country Status Overview

DAC Development Assistance Committee (OECD)

GDP Gross Domestic Product

GLAAS UN-Water Global Analysis and Assessment of Sanitation and Drinking-Water

IBNET International Benchmarking Network for Water and Sanitation Utilities

IBRD International Bank for Reconstruction and Development

IEA Institut de l’Eau et de l’Assainissement, Morocco

IRC International Water and Sanitation Centre

ISIC International Standard Industrial Classification of All Economic Activities

JMP WHO/UNICEF Joint Monitoring Programme for Water Supply and Sanitation

MDGs Millennium Development Goals

MTEF Medium-term Expenditure Framework

NEA National Education Account

NGO Non-governmental Organization

NHA National Health Accounts

NSO National Statistical Office

ODA Official Development Assistance

OECD Organization for Economic Cooperation and Development

PER Public Expenditure Review

Ofwat Office of Water Services

PPP Purchasing Power Parity

PRSP Poverty Reduction Strategy Paper

SWA Sanitation and Water for All

SDGs Sustainable Development Goals

SEEA System of Environmental and Economic Accounting

SEEA-Water System of Environmental and Economic Accounting for Water

SFP Strategic Financial Planning

SHA System of Health Accounts

SNA System of National Accounts

UIS UNESCO Institute of Statistics

UN United Nations

UNSD United Nations Statistics Division

UNESCO United Nations Educational, Scientific and Cultural Organization

UNICEF United Nations Children’s Fund

UOE UNESCO/OECD/Eurostat

USAID United States Agency for International Development

WASH Water, Sanitation and Hygiene

WASH accounts Water, Sanitation and Hygiene Accounts

WHO World Health Organization

WSP Water and Sanitation Program of the World Bank

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Introduction

This Guidance Document sets out a methodology to identify and track financing to the water, sanitation and hygiene (WASH) sector. Referred to as WASH accounts, its purpose is to help countries track sector financing on a regular and comparable basis. Indicators drawn from the exercise are expected to support evidence-based policy-making. While the principal objective is to compile national level WASH accounts, the methodology can be applied at various levels, including the regional or city level.

Further methodological development will doubtless be needed in future years, as more countries apply the methodology. The long-term aspiration of the TrackFin (tracking financing) initiative is to develop a common approach to obtaining reliable financial data. Achieving this will guide improved decision-making at the national level, and facilitate benchmarking within and between countries.

Why is a methodology needed to track WASH financing?

This methodology is based on the findings of the WHO and UN-Water GLAAS Working Paper “Tracking national financial flows into sanitation, hygiene and drinking-water” (Trémolet & Rama, 2012) published in July 2012. The paper stressed that effective financing for water, sanitation and hygiene is essential if the services necessary to save two million lives each year are to be delivered and sustained. To date, limited availability of financial data, coupled with inadequate monitoring systems, has impeded countries’ ability to assess progress and improve performance. The working paper concluded that the current understanding of financial flows to the WASH sector at the national level is limited.

Against this background, there is common agreement that better understanding of financing to the WASH sector at the national level is critical for policy development and implementation. It is also important to encourage better and more equitable utilization of existing funds, and to attract additional financing. There is consensus, given the current deficiencies of financial data in the sector, that this is a difficult and challenging task. Even where data are available, an adequate level of disaggregation may not be possible. A methodology that could be used by a broad range of countries is therefore required.

Demand for sound financial information in the sector has been confirmed at the highest political level, such as at the High Level Meetings organized by Sanitation and Water for All (SWA) in Washington DC in 2012 and 2014. On these occasions, several SWA member countries made commitments to improving financial tracking in the WASH sector.

What is the TrackFin initiative?

These calls for action provided the rationale for launching the WASH TrackFin initiative in August 2012. Its purpose is to develop and apply, over time, a common methodology for tracking financing to the WASH sector. This Guidance Document presents the TrackFin methodology as it currently stands, based on pilot results from Brazil, Ghana and Morocco obtained in 2014.

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Guidance Document objectives

This Guidance Document sets out a methodology to help countries produce WASH accounts. Its purpose is to track all expenditure in the WASH sector by all economic entities, including governments and public institutions, public and private organizations, NGOs, foundations, international and national donors, investors, and households.

The methodology enables countries to answer four key questions:

• What is the total expenditure in the WASH sector?

• How are funds distributed to the different WASH services and expenditure types? • Who pays for WASH services and how much do they pay?

• Which entities are the main funding channels for the WASH sector?

More specific policy questions may be answered depending on the level of detail generated. Data could, for example, be broken down to evaluate the distribution of WASH expenditure at the regional level, and to examine issues of equity. Early identification of specific questions that policy-makers would like to address is fundamental so that the data produced can be as policy-relevant as possible and capable of informing specific funding decisions.

Why should countries develop WASH accounts?

WASH accounts can help country decision-makers gather valuable information on current sector financing, track its evolution over time, and benchmark spending against other sectors or other countries. These accounts will provide detailed information on the origins of WASH funding and how that funding is used. The many benefits of this approach include the following:

• Increased transparency over funding to the WASH sector: WASH accounts enable the tracking of expenditure across time, and the benchmarking of expenditure against sector targets or targets in other sectors or countries;

• Ability to monitor the allocation of funding to sub-sectors and geographic regions according to need and in an equitable manner;

• Ability to monitor the implementation of a financing strategy for the sector, leverage further investment, and support the institutions responsible for channelling funding to the sector; and

• Ability to track whether commitments made by sector actors have been met.

WASH accounts can also provide the foundation for robust and transparent communication with sector stakeholders, and the public at large, concerning the financial means deployed within the water sector. This facilitates comparison between financial investment in the sector and results achieved.

Target audience

The Guidance Document has been developed for governments and their advisers, especially in middle-and-lower-income countries. Its objective is to guide the preparation of WASH accounts to strengthen national policy-making and facilitate international reporting, such as for the GLAAS report. Country-level WASH accounts are also likely to interest bilateral donors, multilateral institutions, NGOs and philanthropic organizations seeking financial data to support programme planning at the national and international level.

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Overview of the methodology

The methodology is applied in a series of steps, as outlined in Fig. 1 below.

STEPS DELIVERABLES

NATIONAL STAKEHOLDER GROUP MEETINGS

1. Get started

1.1. Mobilize political support for WASH accounts

1.2. Set up a strong WASH accounts team backed by institutions

1.3. Define the WASH accounts’ scope and key policy questions

1.4. Identify data requirements and plan the work

2. Collect data

2.1. Define WASH sector boundaries in terms of services

2.2. Map out service provision arrangements and financial flows 2.3. Collect data on financial flows and

fixed asset stocks

3. Analyse data and report findings

3.1. Compile WASH accounts and indicators

3.2. Prepare WASH accounts report 3.3. Disseminate findings to policy-makers

4. Prepare for the next WASH accounts

Inception report

Start-up meeting

Interim report

WASH accounts validation meeting Final report

Policy briefs Sector

dissemination workshop

Figure 1. Overview of proposed methodology to track WASH financing at the national level

The WASH accounts final report should be approximately 60 pages (additional relevant detail can be annexed) including a set of 11 WASH accounts tables and an Executive Summary. The report should cover three main aspects:

• Results of the analysis;

• Policy recommendations based on the outcomes; and

• Recommendations to the WHO Secretariat and expert group on improvements or modifications to the global methodology, based on challenges encountered and measures taken to overcome them.

Countries are encouraged to gather existing data where possible, but where these are weak or non-existent, gaps should be filled by accurate estimates based on a combination of actual data and transparent assumptions. These assumptions can be refined in subsequent exercises, so as to gradually improve the level of precision in financial estimates.

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Box 1. The System of National Accounts (SNA)

The System of National Accounts (SNA) is a broad structure for national economic accounting. This system was first adopted by the United Nations in 1952, and has since been revised and updated. The rules and structure of the SNA are contained in a manual entitled, “System of National Accounts 2008”. It is the internationally agreed standard set of recommendations for compiling measures of economic activity.

The SNA comprises a set of coherent, consistent and integrated macroeconomic accounts, based on internationally agreed concepts, definitions, classifications and accounting rules. It provides an overview of economic processes, demonstrating how production is distributed among consumers, businesses, government, and other nations. It shows how income originating in production, modified by taxes and transfers, flows to these groups and how they allocate these flows to consumption, savings, and investment. It provides the definitions that underlie concepts such as gross domestic product (GDP).

Specific areas of learning, and references to additional resources or Methodological Notes, are highlighted throughout the text using the following symbols.

Learning from country experiences: The methodology was initially tested and subsequently revised in Brazil, Ghana and Morocco. Similar approaches may have been used in other countries. Where insights were gained from these experiences, they are highlighted in boxes showing the flag of the country concerned.

Learning from the health sector: The methodology draws substantially on the System of Health Accounts (SHA) developed over the last 20 years in the health sector and currently used on a regular basis by more than 100 countries throughout the world. Learning that can be gained from the SHA is shown in a box bearing this sign.

Coordinating with SEEA-Water: TrackFin is being developed in parallel with the rolling-out of the SEEA-Water system of water accounting, which aims at developing comprehensive Water Accounts over time by tracking both physical (hydrological) and financial flows. WASH accounts can be seen as a subset of these broader Water Accounts. Where SEEA-Water Accounts are developed, coordination between the two methodologies and dialogue between the teams should be encouraged. Boxes with this sign highlight areas where the SEEA-Water methodology should be taken into account to increase harmonization.

Potential challenge: The development of WASH accounts is likely to give rise to a number of specific challenges. These challenges, and potential solutions, are highlighted in boxes with this sign.

Methodological Notes: These provide more in-depth detail on the methodology, proposing alternative approaches to specific issues and giving suggestions for future development. They appear as annexes to the Guidance Document.

Resources: These additional resources can be used by stakeholders seeking to apply the TrackFin methodology in the preparation of WASH accounts. They include practical tools, existing outputs from earlier stages of the TrackFin initiative, and a policy brief on WASH accounts for information purposes. They are available on the TrackFin website.

Guidance Document structure

The Guidance Document takes the reader through each step of the proposed methodology. The steps are as follows:

• Step 1 – Get started: Sets out the initial steps needed to initiate the preparation of WASH accounts; • Step 2 – Collect data: Includes guidance on collecting and organizing the necessary data, calling on various

methods capable of reflecting different circumstances;

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• Step 4 – Prepare for the next WASH accounts: Summarizes what needs to be done by the WASH accounts team to extract and document lessons learned, share feedback on the international methodology, and to prepare for the next round.

The sections are set out in the correct order of implementation. The WASH accounts team should familiarize themselves thoroughly with the Guidance Document prior to taking action, to ensure that they understand the overall process.

To complement the guidance given here, a series of Methodological Notes has been developed. These Notes form an integral part of the Guidance Document, providing greater detail and alternative methodologies for specific areas, as shown in the box below. Annex A includes a glossary of key terms employed in this guide, while Annex B contains a list of useful references and websites.

 Methodological Note No 1: WASH services classification systems

 Methodological Note No 2: Classification of WASH uses, actors and financing types

 Methodological Note No 3: Estimating financial flows on a cash flow basis and alternative methodologies  Methodological Note No 4: Estimating financial flows with the Financing Type Approach

 Methodological Note No 5: Estimating the costs of providing services using the Cost-based Approach  Methodological Note No 6: Estimating fixed asset stocks

 Methodological Note No 7: WASH accounts tables and indicators

Additional resources are available on the TrackFin website to support the preparation of WASH accounts. These are detailed in the box below.

 Policy Note: How can WASH accounts support policy-making? This is essential reading for any country currently considering whether to develop WASH accounts, and seeking to better understand their uses and benefits. It provides additional background on how WASH accounts can support policy-making;

 Summary overview of the methodology. This rapid overview of the methodology can be used by countries interested in applying the methodology, and by national stakeholders participating in elements of the process. This might include those providing data or receiving results, but who do not require in-depth knowledge of the entire methodology;

 A brief presenting the summary findings of the pilot exercises carried out in Brazil, Ghana, and Morocco. This covers lessons learned and provides an overview of the main results;

 Summary results of the TrackFin Initiative in the three pilot countries, with associated Powerpoint presentations;  Standard Terms of Reference for the TrackFin champion and Focal Point, the national stakeholder group and the WASH

accounts team;

 Outlines for the WASH accounts interim and final reports and executive summary; and

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1 Step 1 – Get started

Step 1 – Tasks to be undertaken

• Mobilize political support for WASH accounts

– Mobilize support from high level members of government – Identify a country champion and a national TrackFin Focal Point

– Convene a national level stakeholder group to oversee data collection and provide political support to the project • Set up a strong WASH accounts team backed by national institutions

• Identify the overall scope and key policy questions for WASH accounts

– Organize a start-up meeting with members of the national level stakeholder group – Agree on a list of priority policy questions that the exercise aims to answer – Define a time period over which to gather information (2 to 3 years is optimal) - Agree on the geographic scope of the exercise and the level of geographic disaggregation • Identify data requirements and plan the work

– Identify available data and define a data collection plan

– Develop a detailed budget and work plan for data collection and analysis

1.1 Mobilize political support for WASH accounts

The production of WASH accounts will most benefit countries if the outputs are ultimately used by policy-makers and sector stakeholders. The preparation of WASH accounts should, therefore, only take place in response to a clearly expressed policy demand.

The first step consists of mobilizing support for the preparation of WASH accounts from high level members of the government, such as the ministries in charge of WASH services or the Ministry of Finance. This is essential to ensure the success of the exercise, and to overcome potential technical difficulties such as limited availability of information, weak information systems, or internal barriers to greater transparency.

To that end, a champion for TrackFin within the ministries in charge of WASH needs to be identified. This person will lead the exercise, and will designate a TrackFin Focal Point responsible for establishing the WASH accounts team and overseeing the WASH accounts process (see Step 1.2 below). The champion is typically someone who has expressed the government’s intention to carry out the TrackFin initiative, either directly or in response to an invitation from the WHO TrackFin Secretariat or another agency.

The champion will be responsible for obtaining support for the preparation of WASH accounts at the highest level of government. He/she will have clearly explained the expected benefits of undertaking the exercise to policy-makers in relevant sectors, such as the ministries in charge of WASH services, the Ministry of Finance, and the National Statistics Office.

Policy Note: How can WASH accounts support policy-making? This note sets out the potential benefits of WASH accounts for decision-makers in more detail. It is essential reading for any country currently considering whether to develop WASH accounts, and seeking to better understand their uses and benefits. It is available on the TrackFin website.

The TrackFin champion should then convene a national stakeholder group to oversee the production of the accounts. This group is responsible for appointing the TrackFin Focal Point and the WASH accounts team. The group will identify the policy questions that the WASH accounts aim to answer, define their scope, facilitate data collection, review outputs, and provide feedback to the Focal Point at critical moments of the analysis. Ideally, the TrackFin champion should chair the national stakeholder group.

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serves to strengthen links between the policy process and WASH accounts, institutionalizing their preparation so that the exercise can be repeated on a regular basis.

This national stakeholder group can be established at different levels. It might include a TrackFin Steering Committee established at the decision-making level, as was the case in Morocco (see Box 2 – Piloting TrackFin in Morocco: The role of the Steering Committee below). It could also comprise a broader stakeholder group, including all parties likely to provide data for the exercise and to utilize the results. Final decisions on the national stakeholder group will depend on the number of institutions involved in the exercise and the level of engagement required to secure participation of key institutional actors.

The national stakeholder group should ideally include representatives of the ministries in charge of WASH services, the Ministry of Finance, and the Department of Statistics, as well as of the main utilities, regulators, donors, NGOs and foundations active in the WASH sector. To the extent possible, the group should build on existing country-level WASH sector coordination platforms.

Box 2.Piloting TrackFin in Morocco: The role of the Steering Committee

In Morocco, the International Water and Sanitation Institute (IEA) housed in the National Office for Electricity and Water (ONEE) acted as the TrackFin Focal Point for the production of WASH accounts in 2014. To gain high level engagement with TrackFin’s objectives from all sector institutions, IEA set up a Steering Committee at the director level. This proved critical to gaining support and facilitating data collection.

The Steering Committee was composed of directors from all key institutions, including the Ministry of Energy, Mines, Water and Environment, the Ministry of Health, the Ministry of the Interior, the Ministry of Finance, the Ministry of General Affairs and Governance, the High Commission for Planning, ONEE and IEA. In addition, a technical committee was set up with members of the same institutions in order to provide advice to the WASH accounts team on methodological and data collection aspects.

Morocco benefited from having strong stakeholder involvement from the outset. The strong links between IEA and national sector stakeholders was very beneficial in setting up such high level coordination. This meant that the WASH accounts team could collect information rapidly and was able to complete the exercise in five months.

Standard TORs for the TrackFin champion and the TrackFin Focal Point, as well as for the national stakeholder group, can be found on the TrackFin website. In addition, a package of information on TrackFin and WASH accounts (based on resources available on the TrackFin website) should be provided for dissemination to high level government members and key sector stakeholders. This will raise awareness about the benefits of tracking WASH financing and how the outputs can be used for policy.

1.2 Set up a strong WASH accounts team backed by institutions

The Focal Point’s role is to organize and coordinate the WASH accounts team. This team will collect and analyse the data, and prepare all the outputs. As the Focal Point reports to the champion, he or she would preferably be a staff member of the ministry principally in charge of WASH services. Alternatively, the Focal Point could be hosted by a well-established public policy or research institution.

The WASH accounts team should ideally comprise a relatively small number of people with a diverse and complementary range of expertise, including technical and policy experts from the WASH sector and representatives of the National Statistics Office. They will require good analytical and communication skills. Some members of the WASH accounts team should preferably be government personnel, to ensure capacity building at the national level and country ownership of the exercise. This team can either carry out the work itself or obtain the support of a national consultant, who would then form an integral part of the WASH accounts team. This was the case in the Brazil pilot exercise (see Box 3 below).

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accounts team in order to minimize any risk that skills and expertise developed in the process accrue only to the consultant and are not institutionalized for national benefit.

The WASH accounts team should be briefed by the Focal Point, and if necessary by the TrackFin Secretariat. The latter can also be contacted for on-going quality control, and for assistance with implementation of the methodology.

Fig. 2 below summarizes the organizational arrangements necessary for the preparation of WASH accounts, and the Terms of Reference required at each level of intervention.

LEVEL OF INTERVENTION RESOURCES AVAILABLE

International level WHO TrackFin _Secretariat

Support and learning

National director level National _{Stakeholder Group} • TORs for the stakeholder group_{• TORs for champion and focal point}

National manager level WASH Accounts

Team • TORs for the WASH Accounts Team TrackFin

Champion

TrackFin Focal Point

Appoints

Reports

Figure 2. Organizational arrangements for developing WASH accounts under the TrackFin initiative

Box 3. Examples of organizational arrangements from TrackFin pilot exercises

In Brazil, the TrackFin champion was the Director of Institutional Coordination from the Ministry of Cities—the main ministry in charge of water and sanitation services. He appointed the manager of the National Sanitation Information System (SNIS), located in the National Secretariat for Environment in the Ministry of Cities, as the Focal Point. The WASH accounts team was composed of a local consultant and a staff member from the National Secretariat for Environment.

In Ghana, the TrackFin champion was the Director for Water from the Ministry of Water Resources, Works and Housing. He appointed a Ministry of Water officer as the Focal Point. The WASH accounts team was led by the local consultant, and received support from the Focal Point.

In Morocco, the TrackFin champion was the Director of the International Institute for Water and Sanitation (IEA), a research and learning institute housed within ONEE, the main provider of water and sanitation services. He appointed his Head of Research and Development as the Focal Point. The WASH accounts team included a local consultant, and received support from a technical committee composed of managers from the IEA, the Ministry of Health, the Ministry of Interior, the High Planning Commissariat, the Ministry of Finance, the Ministry of General Affairs and Governance, and the utility (ONEE). The technical committee, which was specific to Morocco, was conceived as the executive arm of the Steering Committee (see Box 2 – Piloting TrackFin in Morocco: The role of the Steering Committee above).

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1.3 Define WASH accounts’ scope and key policy questions

To ensure that outputs serve as evidence for decision-making, WASH accounts must be able to answer questions defined by policy-makers. The Focal Point for the exercise should start by either seeking views independently, or if possible, by organizing a workshop to obtain feedback on the issues set out below. This will help to define the exercise, and provide the basis for drafting more targeted Terms of Reference for the WASH accounts team (see Step 1.4 for more detail).

As a minimum, WASH accounts should aim to answer four main questions:

• What is the total expenditure in the sector?

• How are funds distributed among the different WASH services and expenditure types? • Who pays for WASH services and how much?

• Which entities are the main funding channels for the WASH sector, and what is their share in total spending?

Countries should aim to develop all WASH account tables and indicators required to answer these four basic questions. Beyond national level priorities, this will also be useful for international benchmarking purposes. Ways of using the information are summarized in Box 4 below and discussed in more detail, with relevant examples, in the accompanying Policy Note. The indicators required to answer these questions are specified in Step 3.

Box 4.How can WASH accounts data be used for evidence-based policy-making?

WASH accounts can make a significant contribution to evidence-based policy-making. They can help identify funding needs and priorities, and in the design of a WASH strategy, to plan expenditure at the national level based on agreed priorities. Regular tracking of actual spending on WASH services over time can help monitor the efficiency of these policies and ensure evidence-based funding allocation.

• Total sector expenditure data enables the monitoring of funding trends over time, and benchmarking of funding to the WASH sector against other countries or sectors. Information on how WASH expenditure varies over time, and how expenditure compares to that in other countries and sectors can be used to raise awareness of the funding levels required to meet agreed targets. In subsequent stages, data on financial inputs in relation to outputs and outcomes can be used to estimate the cost-effectiveness of sector financing.

• Information on how WASH sector expenditure is distributed across regions, urban and rural areas, sub-sectors, services, service providers, and types of expenditure can be used as follows:

– To identify inequities in the distribution of spending across regions and population groups; – To change the allocation of funds to sub-sectors, services, providers and programmes; – To plan national WASH policies and strategies; and

– To monitor policy outcomes and effectiveness.

• Information on how much is paid for WASH services, and by whom, can be used as follows:

– To define financing strategies, such as the use of targeted subsidies or the leveraging of private funds, and to monitor the effectiveness of these strategies over time;

– To coordinate donor aid and international transfers; and – To track commitments and targets expressed in financial terms.

Data on actual spending on WASH can also be used to track government and donor commitment with respect to sector financing. Several governments have made commitments to the WASH sector at international level. For example, the eThekwini declaration in 2008 committed signatory African countries to establish specific public sector budget allocations for sanitation and hygiene programmes. Compiling this kind of indicator on a consistent, comprehensive and comparable basis is fundamental to tracking the implementation of such commitments. In addition, NGOs and foundations often make significant contributions that are not currently tracked; recording those flows in WASH accounts would facilitate comparison with expenditure by households and government.

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Countries are free to identify any additional policy questions they need answered; this implies the identification of additional specific indicators. Defining the appropriate level of data disaggregation at the outset is essential if the results are to inform decision-making.

If, for example, regional distribution of spending is an area requiring policy attention, WASH accounts can be designed to analyse the share of WASH expenditure by region or by population group. Information of this kind can be used to identify whether inequities across population groups and regions could be reduced by reassigning public transfers to the most vulnerable areas. Data collection and the production of WASH accounts should, therefore, focus on the issues most critical to the country concerned, thereby also ensuring that the exercise is most cost-effective.

Examples of potential policy questions that WASH accounts can address are found in more detail in the Policy Note, “How can WASH accounts support policy-making?”

Methodological Note No 7: WASH accounts tables and indicators. This contains a list of tables and indicators that can be created to address policy questions. The national stakeholder group and the WASH accounts team should familiarize themselves with these tables prior to starting work.

The policy questions defined will drive the scope of the WASH accounts exercise, and the level of detail required for specific elements of analysis. It is therefore critical to agree on these questions before defining a data collection plan. To that end, the national TrackFin Focal Point should call a start-up meeting with the national level stakeholder group. At this meeting, the participants should agree on a list of priority policy questions and the level of detail required for the analysis. For example, would it be sufficient to collect information separately on water, sanitation and hygiene, or would a more detailed breakdown of spending by type of sanitation service be required?

The WASH accounts team should also define the timeframe for the exercise. With respect to financial flow data, it would be preferable to gather data over a period of at least two to three full financial years, rather than only a single year. To ensure the greatest validity for subsequent policy decisions, the most recent data should be used.

Finally, in order to avoid duplication, the national stakeholder group should identify other related initiatives with which collaboration should be encouraged. Some countries, for example, might be in the process of preparing Water Accounts based on the SEEA-Water methodology (see Box 5 below). If this is the case, the two initiatives should seek to harmonize methodologies to the extent possible, and to collaborate on data collection.

The TrackFin initiative currently tracks financing specifically to water supply, sanitation and hygiene services rather than throughout the broader water sector. WASH accounts can therefore be seen as a sub-set of the broader Water Accounts based on SEEA-Water. As the latter may prove somewhat complex for water sector professionals to use, it would be advisable to identify what stage of development the Water Accounts have reached, and whether common terminology can be established. The Water Accounts, for example, use public accountancy terms from the 2008 System of National Accounts (SNA).

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Box 5.The System of Environmental-Economic Accounting for Water (SEEA-Water)

The System of Environmental-Economic Accounting for Water (SEEA-Water) prepared by the UN Statistics Division (United Nations Statistics Division, 2012) provides a conceptual framework for organizing hydrological and economic information in a coherent and consistent manner, thus overcoming the tendency to divide issues along disciplinary lines. SEEA-Water is a potentially important tool for policy-makers, as it provides them with indicators to monitor the interaction between the environment and the economy, a database to guide decision-making on sustainable development paths, and appropriate policy instruments for implementing them.

SEEA-Water is based on the 2003 System of Environmental and Economic Accounting (SEEA) and was further elaborated to reflect the 2008 System of National Accounts (SNA). In 2007, the SEEA-Water framework was adopted as an international standard by the UN Statistical Commission, and countries were encouraged to implement it. In 2010, the International Recommendations for Water Statistics (United Nations Statistics Division, 2012) were adopted to assist countries in the implementation of SEEA-Water.

For ease of application, SEEA-Water has been divided into four areas of policy application, presented in Fig. 3 below. WASH accounts are linked to the first quadrant, “Improving drinking-water and sanitation services”.

Figure 3. WASH accounts in relation to SEEA-Water Accounts

SYSTEM OF NATIONAL ACCOUNTS (SNA)

TrackFin WASH Accounts

I. Improving drinking-water and

sanitation services II. demandManaging water supply and

III. Managing water resources degradation/Improving quality of

water resources IV.meteorological events Adapting to extreme

hydro-Water

security

System of Environmental Economic Accounts for Water (SEEA-Water)

The SEEA-Water framework comprises five categories of accounts:

• Category 1: Physical supply and use tables describing the flows of water from the environment within the economy and back to the environment; • Category 2: Emission accounts describing the quantity of pollutants added to water as a result of production and consumption;

• Category 3: Hybrid and economic accounts linking the physical accounts with monetary information from the national accounts, disaggregated for water and sanitation;

• Category 4: Water asset accounts; and

• Category 5: Quality accounts describing the quality of water and changes in quality; these accounts are still experimental.

Of these, Category 3 (hybrid and economic accounts) is particularly relevant to tracking national financial flows to water and sanitation services as it aligns physical information with monetary information on supply and use. Referred to as “hybrid” because they combine different types of measurement units, these accounts can compare physical quantities with the corresponding economic flows. They include information on the various costs associated with water supply and use, such as water abstraction, purification, distribution and wastewater treatment. They also provide information on financing—for example, the amount users pay for wastewater treatment services, and the extent to which these services are subsidized by government or other entities. Information of this kind can assist official decision-making on cost recovery and water allocation policies, and can be used in economic models to evaluate the potential costs and benefits of creating new infrastructure.

Hybrid and economic accounts can provide data on the following: • The costs of water supply and use;

• The income generated by the production of services;

• Investment in water-related infrastructure and the relevant maintenance costs; and • The user fees paid for water-related services, as well as subsidies received.

To date, more than 50 countries have expressed an interest in compiling national environmental-economic accounting for water following the SEEA-Water framework. These are principally developed countries (European Union countries and Australia), but some developing countries are also starting to adopt the framework. These include Algeria, Bolivia (Plurinational State of), Botswana, Brazil, Colombia, Dominican Republic, Ecuador, Egypt, Jordan, Lebanon, Mauritania, Mauritius, Mexico, Morocco, Namibia, Panama, South Africa, Tunisia, West Bank and Gaza Strip, and Zimbabwe. At the national level, SEEA-Water is being implemented on a step-by-step basis. Only a small number of countries have been able to develop a complete set of Water Accounts comprising both physical and monetary data. The UN Statistics Division is encouraging countries to use this system of accounts by organizing regional workshops and capacity-building activities. Other institutions, such as the World Bank are providing financial support, in particular through the WAVES partnership.1

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1.4 Identify data requirements and plan the work

Following the identification of policy needs, the Focal Point should draw up tailored Terms of Reference for the production of WASH accounts. These Terms of Reference should reflect the country context, existing knowledge about data availability, and the policy questions identified. The WASH accounts team should then carry out preliminary work to assemble available information, identifying data gaps and key issues in relation to the specific country context. They will also identify potential data collection strategies and estimation methods to address gaps and weaknesses, and present them at a national-level workshop to be attended by all members of the national stakeholder group, together with a broader range of relevant actors if feasible.

1.4.1 Identify available data and define a data collection plan

Before launching the inception phase, the team needs to familiarize itself with the methodology. Step 2 in particular, and the associated methodological notes, present the type of data required and potential data sources.

To keep the costs of the exercise down, countries should start by identifying relevant data already available through existing reports and information systems. Examples of potential documentation appear in Box 6 below. If data are not available, the team should identify a strategy for collecting or estimating the missing data.

Data availability is likely to be a key constraint. The WASH accounts team should therefore initially aim for optimum accuracy within this constraint. In some cases, it might be necessary to collect primary data, particularly for the costs of certain services such as informal providers, or certain financial flows such as household investment in on-site sanitation. These are unlikely to be routinely collected. When new surveys are not possible, or are too expensive, formulating assumptions to derive initial estimates will be necessary, even if these assumptions are approximate.

Step 2 of this Guidance Document proposes ways forward on specific data issues. As collecting new data has budgetary implications, these should be taken into account from the start. It is also important to consider trade-offs between different methods of data collection.

Box 6.Examples of existing information

• Household surveys, for example UNICEF’s Multi Indicator Cluster Surveys (MICS)

• Access data from the WHO/UNICEF Joint Monitoring Programme for Water Supply and Sanitation (JMP) • GLAAS reports and survey responses

• Information on the water sector from National Statistics Offices

• The World Bank Water Sanitation Programme’s Country Status Overviews (sub-Saharan Africa only) • Poverty Reduction Strategy Paper (PRSP) documents and planned poverty reduction expenditure • Medium Term Expenditure Frameworks

• National sector plans and policies • National budgets

• Local government budgets (for decentralized WASH sectors, for a sample of localities) • Utilities’ financial accounts

• Sector financing reports produced by the sector regulator (where these exist)

• OECD Creditor Reporting System and data from the Development Assistance Committee (DAC) database • SWA Aid Effectiveness Working Group and Country Processes Working Group documentation • Data from the IBNET database on water and sewerage utilities performance

• UN-Water Country Briefs

• World Bank Public Expenditure Reviews (PERs)

• Relevant studies of the United Nations Economic Commissions • Africa Infrastructure Country Diagnostic studies

• WASH sector reports • Project-specific documentation • Reports on decentralization processes

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Where there has already been some analysis of the WASH financing system, country profiles and reports on different segments of the system may indicate other data sources. The WASH accounts team should interview key informants in stakeholder institutions to identify the extent of data availability within those organizations. With respect to private operators and non-profit organizations, it will be important to seek out umbrella organizations such as NGOs and industrial associations, as these may have some consolidated information on their activities. International organizations should be contacted as they may have databases complementing or extending national sources, particularly on international aid issues.

Potential challenge: Alignment with National Statistics Office (NSO) systems

When identifying data sources, the WASH accounts team should assess the extent to which NSOs already collect financial data from the WASH sector at a level of detail permitting conclusions to be drawn for policy definition. It would be preferable to align with the NSO’s classification system to facilitate integration further down the line, but this may not always be possible. • If NSOs collect data on WASH, it is important to work with them to identify how this data can be extracted and used by sector actors. This will ensure that the data collection exercise is embedded in national systems and can be repeated at minimal cost. A key area of coordination will be to identify how NSOs and sector stakeholders can work together on WASH policy needs to produce data at the most appropriate level of disaggregation. WASH sector stakeholders can also learn from NSOs on data collection methods.

• If WASH statistical data are insufficiently detailed, either because NSOs are performing poorly, or they do not collect data from a comprehensive set of WASH service providers, it will be necessary to initiate a sector-level data collection process.

1.4.2 Develop a detailed budget and work plan

Once all available information has been mapped, the WASH accounts team should prepare an inception report. This will contain a work plan and detailed budget for producing WASH accounts. Recommended content for this report is presented in Box 7 below.

Box 7. Key points to cover in the inception report

The inception report should contain the following information:

• Overview of the institutional arrangements established to manage TrackFin in the country • Summary of key results from the review of documentation available on WASH sector financing

• Summary of discussions held at the inception meetings and the national stakeholder group start-up meeting, including: – Definition of the scope of the exercise in terms of duration (number of years of data collection) and geographic area – Identification of the key policy questions drawn up by the national stakeholder group

• A detailed workplan and associated budget

Annexes should include the minutes of the start-up meeting, a list of members of the national stakeholder group and the WASH accounts team with their Terms of Reference, and the list of wider sector stakeholders with their contact information.

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Potential challenge: Defining a budget and workplan for WASH accounts

• WASH accounts should ideally cover the whole country, but could include detailed information for specific regions only, with data for other regions based on extrapolation. If there are substantial discrepancies between geographic areas, regions should be classified into types and data should be obtained from at least one region from each type, to provide an adequate basis for representative extrapolation.

• If answering a key policy question requires disaggregation of data by region, the team should check the geographic boundaries of different data sources. Some organizations might aggregate data based on water basins, while others may use municipal boundaries. It would require significant work to reconcile differing geographic boundaries—probably requiring estimations and triangulation.

• Depending on how the WASH sector is organized, data collection may need to be conducted separately in each sub-sector. In a developing country, the service provision and financing arrangements for urban water, urban sanitation, rural water and rural sanitation tend to differ. Hence each of the four sub-sectors should be considered separately, and the analysis may therefore need to be repeated in each, even though the methodological tools and approaches remain the same.

Potential challenge: Contracting consultancy support for the WASH accounts team

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2 Step 2 – Collect data

This section sets out in more detail the framework for preparing WASH accounts. Its purpose is to serve as a practical guide for identifying, collecting and classifying financial data.

To define the data collection plan, the WASH accounts team must be in a position to answer three main questions:

• What WASH services are consumed and by whom? • How are these services provided and by whom?

• How much do these services cost and how are they financed?

Fig. 4 below draws on a figure developed for the SHA. It presents the main “dimensions” to examine in tracking financing to the WASH sector at the national level. These dimensions are the main classifications used to create WASH accounts.

1_{Initial capital costs of putting new services in place, including ‘hardware’ such as pipes, toilets and pumps, and one-off support or ‘software’ costs,}

such as for detailed design/engineering studies or associated training and consultation.

Costs (C)

Costs of WASH goods and services produced

• Investment costs including hardware and associated support1

• Operating and maintenance costs • Large capital maintenance costs • Financial costs

• Support costs (also referred to as software costs)

• Taxes

Services (S)

WASH services consumed Water supply services

• Water supply through large network systems • Basic drinking-water supply

Sanitation services

• Sanitation though large network systems • Basic sanitation

Support services to the WASH sector

• Policy-making, legislation and regulation, planning, programme administration and governance

• Capacity building

Water resources management (related to water supply and sanitation services) • Water resources protection • River basin development

Hygiene

• Hygiene promotion programmes (including in schools and health care centres) • Household-level hygiene activities

Service providers (P)

Actors engaged in the production and delivery of WASH services

• Government agencies • Network corporate providers • Non-network corporate providers • NGOs and community-based organizations • Self-provided users

Uses (U)

Type of use of WASH goods and services

• Served domestic use • Self-provided domestic use • Served non-domestic use • Self-provided non-domestic use

Financing Types (FT)

Financial flows that circulate between financing units and service providers

• Tariffs for services provided • Users’ expenditure on self-supply • Domestic public transfers • International public transfers • Voluntary contributions • Repayable financing

What is being

financedand by whom?

Financing Units (FU)

Institutional entities that provide funding to the sector

• Users

• National authorities • Regional authorities • Local authorities • Network corporate providers • Non-network corporate providers • Economic and quality regulators • Bilateral and multilateral donors • NGOs and community-based organizations • Banks and financial institutions

What is being produced by whom

and at what cost?